Ironwood Pharmaceuticals Inc (IRWD) 2016 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Ironwood Pharmaceuticals Q3 2016 investor update conference call.

(Operator Instructions)

As a reminder, this conference is being recorded. I would like to introduce your host for today's conference Meredith Kaya.

Good morning and thanks for joining us for our third quarter 2016 investor update. Our press release crossed the wire earlier this morning and can be found on our website, www.ironwoodpharma.com.

Today's call and accompanying slides include forward-looking statements. Such statements involve risks and uncertainties that may cause actual results to differ materially. A discussion of these statements and risk factors is available on the current Safe Harbor Statement slid as well as under the heading risk factors in our quarterly report on form 10-Q for the quarterly ended June 30, 2016 and in our future SEC filings. All forward-looking statements speak as of the date of this presentation and we undertake no obligation to update such statements.

Joining me for today's call's are Peter Hecht, Chief Executive Officer, who will provide a few introductory remarks; Tom McCourt, Chief Commercial Officer, who will provide an overview of the commercial activities; and Tom Graney, Chief Financial Officer who will review our operational execution, financial performance, and guidance. Mark Currie, Chief Scientific Officer will be available during the question-and-answer portion of the call. Our speakers will be referring to slides available via the webcast. For those of you dialing in please go to events section of our webcast to access the webcast slides.

I would now like to turn the call over to Peter.

Thanks Meredith. And congratulations to Cubs fans everywhere. What a game huh?

Here at Ironwood, we delivered another strong quarter of growth, driven by our flagship product, LINZESS, the launch of our second commercial product ZURAMPIC, and encouraging advances across our innovative pipeline. Our revenue increased 67% year-over-year to $66 million powered primarily by another quarter of strong LINZESS demand. In its fourth year since launch, LINZESS continues to show rapid sales growth up 40% from the third quarter of 2015 and remains on track to exceed $1 billion by 2020.

We launched ZURAMPIC in the beginning of October, targeting the estimated 2 million Americans suffering from uncontrolled gout. You'll hear more from Tom McCourt on that shortly.

With LINZESS and ZURAMPIC we have two commercial products with the potential for long durability, high-margin growth, and an opportunity to help millions of patients suffering from chronic, debilitating conditions. Our experienced, focused, commercial team including approximately 300 terrific clinical sales specialists are bringing both of these products to roughly 30,000 of the highest prescribing primary care physicians in the US.

We expect Ironwood to deliver continued strong top line growth as we move towards becoming cash flow positive in 2018. During this period, we look forward to three additional potential commercial launches, Including the 72 microgram does of Linaclotide, the Lesinurad Allopurinol fixed dose combination product, and Linaclotide for IBS-C in Japan through our partner astellas.

We also expect several important data readouts, including results from the phase IIb trial with Linaclotide colonic release at the end of this year, the IW3718 phase IIb trial and refractory Gerd and multiples phase II studies from our [STC] stimulators which we believe have game changing potential in vascular and fibrotic diseases. In total, we believe we have the assets and capabilities to drive strong revenue growth and cash flow for many years to come and the opportunity to bring a series of additional major innovations to the market.

With that I'll turn it over to Tom McCourt. Tom take it away.

Thanks Peter good morning everyone. As Peter mentioned, we delivered another strong quarter for LINZESS, reinforcing its position that the US brand of prescription market leader for the treatment of adults with IBSC and chronic constipation. Nearly 700,000 LINZESS prescriptions were filled during the third quarter, a 26% increase year-over-year and more than 5.5 million LINZESS prescriptions have been filled by more than a million unique patients since launch. Further, as more LINZESS is prescribed and we continue to bring more OTC patience into the branded prescription market, LINZESS continues to both grow the market and caption market share.

Year to date, through the third quarter of 2016, new prescription market share increased by 17% and total prescription market share increased by 22%, compared to the same period last year. Payer access remain strong with greater than 90% unrestricted access among Medicare part D plans, and greater than 70% unrestricted access among commercial health plans. This is a great position to be in and we will continue to work hard in our efforts to ensure millions of IBSC and chronic constipation patients have access to LINZESS at an affordable co-pay.

Physician satisfaction and intention to prescribe LINZESS continues to increase over time. In September, 2016 a market research study was conducted involving more than 250 gastroenterologists and primary care physicians, over 70% reported to be very to extremely satisfied with LINZESS. Additionally, surveyed physicians reported that they intend to choose LINZESS for almost 40% of their patients suffering from IBS-C and chronic constipation and that percent has nearly doubled since LINZESS was first launched.

We have made substantial progress in four years since launch but with just over 1 million patients having had the opportunity to try LINZESS and an estimated 40 million adult Americans suffering from IBS with constipation and chronic constipation there remains a large opportunity within this category. The majority of these patients are dissatisfied with currently available treatment options, primarily OTC laxatives and are actively seeking care for their abdominal and constipation symptoms.

LINZESS has set the bar high and its ability to relieve bothersome abdominal constipation symptoms has resulted in a very high treatment satisfaction. This combined with broad access, has led to continued strong growth in the prescription volume and sales.

As the market leader, we will continue to innovate by seeking to improve the clinical profile and expand the clinical utility of LINZESS to better serve an even broader patient population. This begins with the 72 microgram dose of Linaclotide, which is currently under review with the FDA and if approved will launch in early 2017. We believe providing a lower dose will increase physicians prescribing of LINZESS within this large heterogeneous adult chronic constipation patient population.

Later this year we also expect to have phase IIb data from our Linaclotide colonic release formulation. A second-generation product that we are developing that's designed to enhance the clinical profile of the drug in appropriate patients.

One of the key attribute of LINZESS is its ability to relieve abdominal pain in patients with IBS-C. We believe, with this colonic release formulation, we have the potential to see greater and faster pain relief in this patient population. If data from the phase IIb are positive we expect to advance the program into phase III in 2017.

We believe Linaclotide colonic release if approved could expand the IBS-C and chronic constipation prescription market by improving the clinical performance and enabling us to more effectively communicate the benefits of Linaclotide. That will in turn motivate physicians to chose Linaclotide for even more appropriate patients, encourage more patients to request Linaclotide and anticipate patients will be even more adherent on therapy due to the improvement in symptoms.

Before I turn to ZURAMPIC, I want to quickly finish by saying that we are delighted with the progress we made with our partner Allergan as we continued to demonstrate strong content prescription and revenue growth. This position is grounded on the real-world clinical performance of LINZESS, a high level treatment satisfaction, extensive clinical experience, and broad payer access and reimbursement. When combined with the 72 microgram dose and the colonic release formulations, if approved we could further improve the clinical experience for patients and physicians, further strengthen the value propositions for payers and with patent protection expected into the 2030s the LINZESS franchise has the potential to exceed $1 billion in net sales by 2020 and $2 billion in peak US sales.

Turning to our gout franchise. We launched ZURAMPIC last month. After spending most of September with the field sales team at various training and launch meetings as well as the early feedback we are hearing from physicians, I'm confident in our ability to successfully bring ZURAMPIC to the market.

ZURAMPIC is an oral therapy for the treatment of hyperuricemia associated with uncontrolled gout and it is to be used in combination with the xanthine oxidase inhibitor or an XOI. As Peter said earlier there about 2 million patients in the US who suffer from uncontrolled gout and have very limited numbers of treatment options.

Our commercial strategy for ZURAMPIC is quite similar to that of LINZESS. Focused on three key areas that we believe will enable us to drive growth over time.

First, we will work to educate physicians and create greater urgency for them to treat appropriate uncontrolled gout patients. Most physicians that treat gout are in primary care and we have a team of approximately 300 clinical sales specialists who are now focusing roughly 30,000 of the highest prescribing, early adopting, primary care physicians who treat patients suffering from gout in addition to IBS-C and chronic constipation.

Second we need to secure access and affordable co-pays for the millions of patients suffering and we are our in active negotiation and discussions with these payers.

And third, we will seek to activate appropriate patients who can benefit from ZURAMPIC. These patients are on an XOI but still not achieving target serum uric acid levels and continue to suffer from multiple painful players.

We're in the process of launching an online digital DTC campaign, aiming to help patients self identify and take in to [action]. We're encouraged by the initial feedback that we're hearing for the sales organization, but we're only about a month into launch and still have a lot of work to do. We anticipate the first 12 to 18 months will be a gradual ramp, typical of a focused primary care launch.

From a development perspective, we submitted the NDA for the fixed dose combination Lesinurad and Allopurinol and if approved, expect to launch it in late 2017. Allopurinol is currently used in over 90% of patients with gout and the fixed dose combination product will enable those patients with uncontrolled gout to take both medications at the same time in one pill, which we believe will help drive physician adoption and further growth in the category.

We plan to begin a post marketing study next year to further characterize the renal and cardiovascular safety of Lesinurad. We expect ZURAMPIC to be cash flow accretive in 2019 and both ZURAMPIC and the fixed dose, combination if approved will add significant revenue with an estimated peak sales opportunity of greater than $300 million.

With thank, I'll over to Tom Graney.

Thanks Tom. I will spend the last few minutes highlighting a couple of recent corporate updates as well as reviewing our third-quarter financial results and guidance. You can find the detailed financial statements in our press release.

Beginning with the corporate update. First, in September, we announced the closing of a $150 million debt refinancing. As we have said for some time, we continually look to improve our capital structure, and to lower our cost of capital. We were able to achieve both with this refinancing with a new debt bearing an interest rate of 8.375%. The transaction is expected to fund in early January 2017, when the prepayment penalty on our existing 11% Pharma notes expires. The proceeds of the new notes will be used to immediately pay down the remaining principal balance of the Pharma notes.

Second, as expected, following the fourth anniversary of the FDA approval of LINZESS in August 2012, in our [program] we received notice of ANDA filings by generic drug manufacturers, including Teva, who are seeking approval from the FDA to manufacture use and sell generic versions of LINZESS before its patents expire. As a reminder we have nine Orange book listed patents, that we that we believe provide robust and lasting patent protection. Together with Allergan we intend to vigorously protect Linaclotide franchise and are currently filing patent infringement lawsuits against these ANDA filers.

Turning to our third-quarter financial results. We ended the third quarter of 2016 with $320 million in cash and [investments]. Cash used in operations was $645,000, compared to $26 million used in the year ago period. The decrease in cash used in operations was primarily due to higher LINZESS revenue and changes in working capital.

We recorded $66 million in Ironwood revenue on our P&L for the third quarter up 67 % in the compared to the third quarter of 2015. Revenue primarily consists of revenue from our LINZESS collaboration with Allergan.

Total operating expenses were $94.4 million in the third quarter including $45 million in SG&A expenses and $37.5 million in R&D expenses. SG&A expenses increased this past quarter compared to 2015, primarily due to investments associated with the launch of ZURAMPIC. R&D expenses increased in the third quarter of 2016 as a result of continued advancement of our pipeline as well as costs associated with the [clinician], of the Lesinurad, Allopurinol fixed dose combination product and the expansion of our medical scientific affairs team for Lesinurad.

Turning to our non-GAAP disclosures, we now exclude three non-cash adjustments to arrive at our non-GAAP measures. The mark-to-market adjustments related to the convertible note hedges on warrants, the amortization of acquiring tangible assets and, for the first time this quarter, the change in fair value of contingent consideration associated with our licensing agreement with AstraZenica for Lesinurad. These three adjustments resulted in a charge of $7.3 million or $0.05 per share.

GAAP net loss for the quarter was $33.2 million or $0.23 per share and non-GAAP net loss was $25.9 million, or $0.18 per share. In the third quarter last year the GAAP net loss was $47.4 million or $0.33 per share and non-GAAP net loss $36.1 million or $0.25 per share.

LINZESS net sales for the quarter were $164 million, up 40% compared to the same period in 2015 driven by strong prescription demand and increased net price. The LINZESS brand collaboration in the US recorded $81.5 million in net profit for the quarter, compared to $35.8 million in the third quarter last year. In other words net profit grew $45.7 million on sales growth of $46.9 million.

Ironwood recorded $60 million in revenue this quarter from the LINZESS brand collaboration contributed to the overall growth of over 67% year-over-year. As a reminder, we record our share of the brand's commercial contribution as collaboration revenue each quarter. With the continued focus on investment in the brand against the backdrop of strong LINZESS revenue growth, commercial margins for LINZESS expanded to greater than 60%, resulting in greater contributions to Ironwood's top line.

Moving to our 2016 financial guidance. As a result of our continued financial discipline, we now expect to use less than $50 million in cash for operations in 2016 down from our previous guidance of less than $70 million. The rest of our guidance has not change from last quarter.

In closing, with solid file financial profile, two commercial products and exciting innovative pipeline, we are on track to build a top performing commercial biotech company with the potential to deliver strong revenue and cash flows for many years to come.

With that I will hand it back to Glenda to begin the Q&A portion of the call.

(Operator Instructions)

Jeff Mecum, Barclays.

Good morning guys and thanks for the question. Peter, it looks like you are starting to really get some operating leverage out of LINZESS. And this actually before the ZURAMPIC launch. My question is, how are you guys thinking of allocation resources to push other development programs such as 1973 or 1701. To push those faster through the clinic?

And then for Mark for those two programs what should we think about for 2017 in terms of major value creating events? Thanks.

Thanks for the question, Jeff. I will start and then I'll turn it over to Mark and he can tell you a little bit about the excitement in [SGC]. It's a really good point. We're seeing growing operating leverage, nice revenue growth from LINZESS. Really we've seen it since the drug launched at the beginning of 2013. Quarter-over-quarter and year-over-year nice growth. The commercial margin's expanding. And we really were just getting going with this brand.

Primary care, when you break through, and we have really nice broken through now, has a long trajectory of growth. We're adding patients every quarter into the market and the dynamics of that marketplace are very strong.

I think we feel very bullish about the IBS-C and chronic constipation market for the long term. And as you know, got durability for that franchise out into the 2030s when the colonic release program comes through. And even without colonic release we're out to 2031. We like that opportunity quite a lot.

ZURAMPIC fits in great with that program and gives us a chance to leverage what we have built with LINZESS and again to grow revenues and build a category of real unmet need with millions of patients in a not very crowded market with a focus selling effort. We do like the operating leverage and it gives us a chance, both to grow top line and to bring cash flow positivity in 2018 as we began to return cash and become cash flow positive.

We are continuing to invest importantly in innovation across pipeline. We have mid-stage efforts and colonic release and in 3718. And we're very excited about the game changes in FCC. Mark, I don't know if you want to talk about FCC?

Yes Jeff. I think as we look at, it is in contact that Peter just described with colonic release and 3718 data colonic release reported into this year and then 3718 it in 2017. We have got some really telling data that will help inform our next steps in those programs. And that's in contact with the opportunity with FCC.

We have certainly [thought it] now to move forward out of phase 1 studies and move our lead compounds into phase 2 studies. 1973 is our lead there. That molecules advancing in for diabetic complications we will have some early reads next year on the effects of pharmacodynamic activity in the diabetic population. So that is our first area of trying to characterize the opportunities in a disease where they are clearly diabetic complications that are characterized by vascular dysfunction and metabolic dysfunction and also inflammation and fibrosis.

We think that diabetic neuropathy and preserved [dejection] in heart failure fit into those areas. And so we are starting to think through how we would advance those programs. But first we'll started with characterizing in the diabetic population, particularly around the vascular effects.

From there 1701 we're advancing in for a range of orphan disease opportunities. And we expect to be indicating those in much further degree of depth later this year or early next year.

Okay. Thanks guys.

David Lebowitz, Morgan Stanley.

Thank you very much for taking my question. Would you be able to comment on the effort by Teva. Just give us a brief overview of the patents? What patents are they? What is their strategy what patents they are targeting?

Yes I can take that David. As you know it is quite standard fare for innovative products to see end of filings. Sometime shortly after the fourth anniversary of FDA approval it's just part of the standard process. We have received two [and over] notifications so far we expect to receive more over time. It's just part of the process when you're an innovator.

As you know, LINZESS is the result of multiple really great innovations that have led to a very broad and strong IP portfolio. As Tom mentioned, we have nine orange book listed patents and a very broad and deep patent portfolio overall. And we and Allergan intend to vigorously defend that innovation.

With respect to Teva specifically, I think they have filed on all of the orange book listed patents. Again I think that's quite standard.

Okay. With respect to ZURAMPIC, I understand it's early in the run. What is the feedback you've been getting from physicians?

Tom McCourt.

Thanks. We been looking for an asset for a long time. And we were looking for an asset, one that tended to be in a highly symptomatic disease where there was a clear unmet medical need. And a treatment that clearly provided an advancement in care. And could synergize with our existing commercial model. We found that in ZURAMPIC.

The sales force is extraordinarily excited and well prepared. The early feedback we're hearing from physicians is pretty consistent to what we heard in market research when we evaluated the compound. That is one they clearly see and recognize an unmet medical need and a clearly defined patient population where ZURAMPIC would be appropriate.

The willingness and also the rationale for choosing ZURAMPIC on top of the [antioxidant] but just makes sense. Early on I think the signals are strong and encouraging. As I mentioned is still very early.

But also on the payer side, we're getting very good feedback from the major national plans. We're already at the table of them which also is very encouraging at this point in time.

So I think we're very optimistic, as I mentioned we see this as a gradual launch. Keeping in mind, as Peter mentioned, this is going to be a very focused commercial effort. Really leveraging the positions that are also LINZESS prescribers to really maximize the synergy of the commercial organizations. And these are also the physicians were most likely to move quickly. So we're going to get a pretty reasonable read with regard to what we think the commercial opportunity is in the months to come.

Thanks for that. And thanks for taking my question.

Irina Koffler, Mizuho Securities

Thanks for taking the questions. On the colonic release that we're expecting at the end of the year, would you expect the phase 3's to read out before your 30 month stay expires out in 2020 so this compound will be a little bit more visible around that time. That's question number one.

And then question two is now that you have the ZURAMPIC reps out in the field, and maybe some of them are also calling on the LINZESS physicians, can you talk about how the call is going? And any changing dynamics in your collaboration with Allergan on that? Thank you.

Mark, can you take the first part?

Thanks Irina. As you know we are very excited about the potential of the colonic release. And as indicated, we think it does continue to expand intellectual property in this area. And if we can really improve pain relief, it will be quite exciting for patients and I think the physical that treat them.

From the perspective of when we would expect the product to launch, and we certainly think we would have phase 3 data before the 30 month stay. We think we are on track, and I don't think we disclosed yet when we expected the product launch but we would expect that phase 3 data before then.

Yes I only would add there that if you look at the orange book listed patents, we have compositional matter until 2026. We have very strong formulation patents on the original currently [Lenoxitide] forms until 2031. And with the colonic release that would extend is out to the mid-2030s.

So, to reiterate Mark's point, we are very excited about the opportunity to expand the market and help more patients with colonic release. But it's not particularly our strategy with respect to the near term and a challenge. It's more of an opportunity to both expand the market and extend the franchise out into the 2030s.

This is Tom. I will take the call question. As you know, as I mentioned we're calling in about 30,000 primary care docs. And these are the busiest early [docking] docs. They are also writing all three of these products. They're writing LINZESS, they're writing VIBERZI, and they're writing ZURAMPIC or they're writing [gout] products. Within this it is a continuum of docs. We tend to have some of those primary docs tend to be high G.I. writers, some tend to be hide gout writers. But they write everything.

One of the things that we have been working on is this galvanized call with LINZESS. Where we fit LINZESS and VIBERZI together, which has been a very impactful very efficient call. And we were able to slide ZURAMPIC in right behind it. Because we want to keep the sales force delivering that galvanized call because it's become such a strong call.

And then for the other docs in which they tend to be high gout writers, we lead with ZURAMPIC followed by LINZESS and VIBERZI. The one thing that we have seen over the first several works is the sale forces is delivering all three calls 90% of the time, which is really quite remarkable. An I think it says a lot, certainly to the skillful sales force. But also, you get three very innovative products that docs want to hear about. And certainly they want resources around.

I don't see anything changing with our relationship with Allergan. We very much like having LINZESS and VIBERZI together. And we think it strengthens the overall call with these target physicians. So we love the product that we are seeing.

Thank you.

Jason Gerberry, Leerink Partners.

Good morning thanks for taking my questions. My first question, assuming Plecanatide launches next year, I'm curious to get your thoughts on if you anticipate the [PDM] at some point moving the [GCC] glass to a preferred and having one excluded brand. And that creating some catalysts for greater rebating. I'm just curious if you think that this class could evolve like we have seen other class like five ASAs where there's a preferred and an excluded brand.

Yes. This is Tom. I'll take the call. I'll take the question. We will wait and see.

As you know, we have a very strong position with the payers right now. We came in at a very responsible price, with a very strong value proposition which enabled us to secure very strong access that we continue to expand. I think the other pieces is the clinical utility of the drug.

So Plecanatide's coming in initially with a chronic constipation, probably one dose. We got indications for IBS and chronic constipation. And we will soon have three products.

So you think about the commercial or clinical utility of that drug, certainly over the next several years. I think we are in a very strong position. So competition's always good. It's good for everybody. It raises the bar. We're going to see a lot more noise in the market which will grow the market. As a market leader you tend to benefit from that.

But we're going to play tough in the payers space. We have a great account management team on the Allergan side that we're working closely with. And we're going to do everything we can to maintain our position in the payer. But we have to take it one at a time.

It's still got to create value for our shareholders. So we want to be responsible with regard how we're approaching the contracting strategy.

Okay and I can squeeze in a follow-up on ZURAMPIC. I realize it's early days on the managed-care front. But just curious, in terms of the percentage. Patients who can satisfy the step [edit] in terms of a failure of an XOI. What percent currently can get access to ZURAMPIC now? And what are the big events you point is when that access would improve presumably?

Yes. We're still getting our arms around that. Obviously a lot of the big clients will put this in a third tier automatically. And we're still trying to figure out how many of those are actually signing up for that. We'll probably know what that number looks out of the gate here in the next couple of weeks.

But I think the most encouraging thing, is we're literally at the table with all 10 of the major payers right now. And they all see the need. They all see the benefit, this logical combination of an XOI plus ZURAMPIC.

And everything we have seen so far, they seem to be responding well to how we entered the market and the price as well as our contracting terms. And again were wrestling through the right now. But the early signs are very encouraging.

Okay. Thank you.

Anupam Rama, JPMorgan.

Hello this is Eukal on the call for Anupam thanks for taking our question. Regarding the IW 3718 phase 2B trial what threshold or delta and activity are you looking for to move that program forward to Phase 3? And what placebo response should we be looking for?

Really it's a little more complicated I think then that, to be honest. Certainly we will have the primary endpoint around heartburn severity. But we also expect ultimately, to have a responder analysis integrated in for the phase 3 studies based on our interaction with the FDA.

I think the responder analyses tends to put the placebo responses down fairly low as do most of the other responses. But as we look at obviously we are looking for a clinically meaningful change in heartburn severity in this study. And then to be able to use that change to power up what we would look out for the responder analyses.

So I can not give you a specifically looking at X versus Y. Nobody has ever done this study before as far as what will be the placebo response in this population. We certainly expect it to be there. You see it in previous heartburn studies. But this is a very specific population that we are going after. A very large population of unmet needs. But, at this point we certainly continue to look for more in the clinical meaningful response.

Thank you.

Ying Huang, Bank of America.

This is Amanda on for Ying. Two questions. We see that year over year of (inaudible) prescription it is up 30% or 26%. But sales were up 40%. [What is] the net price change accounts for difference there?

Secondly [I want to know] let us know about the PDUFA date for the 72 microgram LINZESS?

Hello Amanda this is Tom Graney. Thanks for the question. I'll take the first one and Mark will take the second one.

We are very pleased with the operational performance of LINZESS year-over-year. We continue to see strong prescription growth which we have said all along really should be the yardstick we measure again in terms of both physician and patient satisfaction. As we continue to grow the market as Tom said, and bring more patients in from the OTC segment of the market into the prescription market.

Again, another really strong quarter of 26% TRX growth. We don't really break out the components of price, which is as you know, made up of both list price and also gross to net adjustments. Those gross to net adjustments will change over time as we alter our market process from a rebating and copay standpoint. But also when we hone our estimates of around return reserves and other accounting judgments and estimates that are also built into gross to net.

We have taken a 16% price increase in the last 12 months. That certainly has helped to improve our net price over this period. But we really don't go into much more detail than that.

Yes. And on the 72 microgram PDUFA date expectation we haven't provided a specific date. We expect the approval to support an early 2017 launch.

Okay. Thank you.

Tim Chiang, BTIG.

[Boris Speaker], Cowen.

Great. I will start with paragraph 4. I'm just curious why do you think they filed it now? Is there any -- specifically unique about the timing of filing it now versus later?

No, it's completely standard fare. They can not file until four years after the first approval. So the drug was approved August 30th or 31st. I cannot remember. I think it was 31st in 2012 -- the 30th of 2012. The 31st is Warren Buffett's birthday. I get them confused.

So four years was the end of August. So that was the first they could file. And we get notified a little bit after that. They always file as soon as they can.

Got you. And on LINZESS pricing, you mentioned there was a reasonably aggressive price increase just over the last 12 months. Just curious the terms of all the discussion of pricing and so forth what is your pricing strategy over the next year or two?

This is Tom. I will take the question. This is something that we think a lot about with regard to the value proposition for the brand. And because we have such strong access with the payer, it is something we are quite thoughtful with.

As you know, we came in at a very aggressive point -- price point well below AMITIZA when we launched. Really to secure strong access reimbursement and really over the last four years. We're catching up to where the more optimal price point is.

And I think, as we move forward, it's something we are obviously very sensitive to. Certainly we have not disclosed what we think the price increase will be over the next year -- our pricing strategy over the next year. But I think obviously with the current environment I think most everybody's tempering their thinking about how aggressive they move on price.

Yes I think the first thing we're focusing on is absolute access to the drug which is our primary objective and we can't compromise that. So we're going to be very thoughtful about how we take price increases moving forward.

Got you. My last question is on ZURAMPIC. Specifically on the combo pill. Just curious did you meet with the FDA before filing? And if so, what was the specific agency's feedback? How do they look at a product where the labels already say they should be combined? What are the key considerations?

Yes. Thanks. So really this is a combination where you basically using the bridging strategy. The clinical studies were already done. So it is taking and filing with the previous PK data. And bridging that PK data into the clinical studies. So I think it's a relatively simplified study. It required very few interactions with the FDA.

I think one piece to comment to here Boris, is obviously this is just the right thing to do for the patient. When you think about, these drugs should be given together and you basically guarantee now that they are given together. So not only is it the right thing to do for the efficacy and safety profile of the drug. But obviously the economics for the patient and the payer are also quite favorable. So we moved very quickly on this. Certainly AstroZenica had done a lot of the lifting early on. They saw the need and the value and we're basically following that strategy which I think is spot on.

Okay. Well thank you very much for taking my questions.

Jamie Ruben, Goldman Sachs.

Hello good morning. This is [Divia Hikash] on behalf of Jaime Ruben. Following on from the pricing discussion earlier. Just want to get an understanding. You must've had discussions with payers on the contracts for 2017. Is there any change that you're seeing with respect to access or rebate levels with respect to 2016? If you could give us color on that? How is that helping with respect to your discussions with ZURAMPIC access as well?

Secondly, when you think about your SGC compounds taking forward into phase 2 at what point do you consider partnering options? At what point does the span become too much for you to take on individually with [respect to giving] given the breadth of the opportunities there?

Tom can you take the first question on payer access for 2017?

Sure as you know, we have had the last three years, we have had very strong and consistent access as far as unrestricted access at very strong and reasonable co-pays. That has been pretty stable.

There has been a couple of sizable wins that we had last year. But it as were going through the ongoing negotiations, we don't see any dramatic changes. I think for the most part, I mean most of the plans are going for a two or three product position in the categories rather than a single sole and exclusive which I think we think is the right thing to do.

We want to make sure that we have a good position. And a fair position in the payer and we don't see that changing over time.

As far as what we're seeing on the ZURAMPIC side. Again one of the really strong premises that we hold here at Ironwood is the importance of the strong value proposition. And it is a reason why LINZESS was embraced and we were able to secure access with the payer. And we feel very much the same way about ZURAMPIC based on the clinical profile the unmet medical need in the value that it can bring.

So I think that is the brand that we want to have in terms of how we approach the payer. But I think we feel good about where we are LINZESS. We think 2017 looks good and so far the early signs on ZURAMPIC look very encouraging.

With regard to the FGC program first of we appreciate the enthusiasm and acknowledgment, it's had very broad opportunities that we're very excited about in some very big markets. Our strategy is, certainly right now are designing and planning to execute on some very focused phase 2 programs that will, again we think inform where the drug has its greatest potential.

Then really have in mind the long-term studies are going out to the phase 3 programs in the rest of the world. Certainly the point in there where we will engage partners, potentially when you get out to those large phase 3 programs and the rest of the world opportunities. But we continue to actively discuss with potential partners that are interested in this space. And when we think the value recognition that we are seeking and the partner that we are really seeking that has the rest of the world capabilities. That's really what the next step would be.

Thank you.

(Operator Instructions)

Our last question comes from Tim Chiang, BTIG.

Hello. Can you hear me?

We can. Hi Tim.

Hello Peter. Hello Mark. Hello Tom. My question is really actually more big picture. It seems like some speculation out there that [actually Pacada] might be interested in buying Salex. How do think of the big Japanese companies in the G.I. segment? I noticed that you guys have a relationship with Estellas with LINZESS and should be on the market for IBS-C sometime next year. How do you view the big Japanese company as player in the US market for the G.I. space?

Thanks for the question Tim. We have a very good relationship with the Estellas. We worked very closely with them to develop and prepare for commercialization in Japan.

That phase 3 program in IBS-C is completed and the drug's under review in the Japanese regulatory agency. We should hear pretty soon. And this is a reminder that phase 3 chronic constipation studies in Japan are ongoing. Again, we have had a very close and positive relationship with Estellas.

They're responsible for commercializing the drug in Japan. We will receive a royalty from them for their successes and efforts in Japan. That's the extent of our relationship with them. And they don't participate with us here in the US.

With respect to Japanese companies participating in G.I. in the US we don't really have much particular insider view. We feel great about the work we are doing in the US, both with LINZESS and with ZURAMPIC.

And our ability to focus on the subset of primary care opportunities where you have very large patient populations, real unmet need, symptomatic disorders, not very competitive spaces, and most important molecules that are either first in class compounds or best in class compounds or really differentiated molecules. Some important way where we can leverage the capabilities we have built here with very strong marketing expertise. Great ability to leverage insights with the customers, with patients. To work collaboratively and effectively with payers. Payers to offer great value proposition to all participants in the value chain. And to maximize access. And with a focused effort to help get these drugs to lots of patients.

We see at a number of other opportunities like that. For instance in uncontrolled or refractory [gerd], we have talked about with IW 3718 the opportunity again a very large patient population. Very well served. Mostly 40 million or so patients taking PPIs. Getting a lot of benefits. Leaving on the order of 10 million patients really suffering from incomplete resolution of their symptoms. And if we're successful in the phase 2B with our bio acid sequestering hypothesis, that's a perfect fit for us in this focused primary care. And it really leverages the strategy we are taking in the US.

We think is quite unique. And we love our competitive positioning there.

When we think about the Japanese Pharmas, it's really our ability to leverage the capabilities that they might bring to us in ex US markets. We're focused in primary care commercialization and generally in commercializing in the US. In markets where we're going to commercialize in the US we feel very good about our ability to successfully participate and compete. Outside the US, we don't intend to commercialize. That's where we interface with the Japanese pharmaceutical companies.

Thanks for the color Peter. One last question. In regards to the financial guidance, obviously, you are -- you're going to use [not] less than $50 million of cash this year. It seems like you are being very focused in terms of managing expenses. And as we head into 2017, certainly I would think that R&D expenses are going to rise your SG&A expenses will probably be around the same. But how does your relationship with Allergan strengthen? I wanted to say in 2017. Do you think it will strengthen, potentially with more partnerships on some of your pipeline products?

Hey Tim this is Tom Graney. I'll take the first part and I'll let Tom comment on the relationship with Allergan. As you know, our focus in operating the business is to make sure we deploy capital in the most value creating way we take that responsibility very seriously in that respect. We do take a very disciplined approach to how we invest both on the commercial side and the R&D side. And we will always do that.

With respect to 2017, we will follow our normal process there and provide expense guidance across the range of the P&L when we have our fourth-quarter earnings call in February. So, I look forward to sharing some insights with you on that. Tom?

This is Tom McCourt. As far as the relationship, as you know, this has been a tremendous collaboration. And its something both companies worked very hard at. And, as you know, I interact with [Bill Merry] an awful lot to make sure we are absolutely aligned in where we are where we're going. I know I can speak for Bill in saying that we both see this as a very much we're still in the growth mode. And while you're in the growth mode you will continue to invest in the brand. As long as it makes sense when you are on this kind of growth curve.

So I know both organizations are committed certainly to the near term investments of the brand. In addition these 72 microgram, as well as the colonic release program looks very exciting. And if the data looks positive it could blow this market wide open.

So I think we are both very excited and very optimistic about where we are. We continue to be in the growth mode. We're going to invest responsibly and together. And I feel very good about the relationship we have now. And I can't think of anybody in the industry we should be partnering with.

Maybe wrap that up if that's okay Tim. For both our selves and Allergan, LINZESS is a very important and fast-growing product. I think we're quite comfortable with the longer-range guidance that we've given that LINZESS will be a greater than $1 billion product by 2020. And as you said with respect to the operating leverage and financial prudence, we expect to be cash flow positive in 2018 as we have said a number of times.

Adding ZURAMPIC in, again we've said before we expect ZURAMPIC to be accretive by 2019 and to be greater than a $300 million product at peak. If you just take those pieces and piece them together over the next four or five years as the pipeline comes to fruition, I think you'll see that we are likely to be one of the fastest-growing companies among all of the commercial bio Pharma companies. And if you look at where we are today, we are trading at less than 6x revenue multiples. So I think there's a lot of opportunity for growth and shareholder value over the next coming years.

And with that we'd like to thank you all for joining us today. And thank Glenda for operating for us. We're available throughout the day. So please reach out to Meredith if you'd like to follow up on the call with any additional questions. Thanks.

Ladies and gentlemen thank you for your participation in today's conference. This concludes the program. ' You may now disconnect. Everyone have a great day.